Finland's Ilmarinen to increase exposure to foreign property

Finland’s Ilmarinen is planning to boost its allocation to property over the next few years, focusing on buying foreign properties directly through joint ventures.

The €31bn mutual pension insurer said it was particularly interested in modern, energy-efficient commercial real estate in good locations.

Timo Ritakallio, the company’s deputy chief executive and CIO, said: “As with other investment activities, it is also important to diversify the real estate portfolio geographically, which is why we have decided to pursue investments with stable returns in foreign markets.”

Right now, the real estate portfolio is very Finland-centred, he said.

Ilmarinen said it would look for potential deals in other Nordic countries, in stable and solvent European property markets such as the UK, France and Germany, as well as in the US.

“In future, we will aim to take advantage of the different pace of economic cycles in the real estate markets of different areas,” Ritakallio said.

Ilmarinen had around €4bn in property investments at the end of September, with domestic investments accounting for nearly 90% of that.

Most of the pension insurer’s foreign real estate portfolio now consists of investments in funds.

Tomi Aimonen, Ilmarinen’s head of direct real estate investments, said the company would invest via joint ventures because of the importance of good local knowledge when making direct property investments.

“We will seek out local partners with whom we can enter into joint investments,” he said.

“With a strong real estate investor that operates in the country in question, we will achieve the best results.”

The company said that, in its foreign real estate investments, it would aim for commercial buildings conducive to long-term investment, and that generate a good, stable return.

“The sites must be in good locations, with modern building technology and high energy efficiency,” said Aimonen.

Ilmarinen has already announced its intention to shift its investment strategy by 2020, taking on more exposure to real assets and private equity.

It has said it will increase investments in private equity to 6% from 4% of total assets by 2015, as well as boost exposure to direct and indirect property.